## Facts

- Commonwealth Edison Co., an Illinois electric utility, was constructing multiple nuclear generating units whose operation depended on Nuclear Regulatory Commission (NRC) licenses.
- On September 22, 1983, Edison filed a Form S-3 shelf registration statement for 3 million common shares under SEC Rule 415, incorporating extensive prior filings by reference.
- On December 5, 1983, Edison filed a prospectus supplement and sold the registered shares at the market price; Stanley C. Wielgos purchased 500 shares in that offering.
- The offering materials disclosed completion-cost projections and discussed regulatory and licensing risks, but did not disclose all internal cost scenarios or all details of ongoing NRC licensing disputes involving certain plants.
- On January 13, 1984, after the offering, an NRC Atomic Safety and Licensing Board denied an operating license for one unit, and Edison’s stock price fell substantially.
- Wielgos, on behalf of a putative class, alleged the registration statement and prospectus were materially misleading under Securities Act § 11 due to (i) understated construction cost projections and (ii) insufficient disclosure of NRC licensing obstacles and delay risks.

## Issues

1. Whether disclosed construction cost projections in a Form S-3 shelf offering were actionable under Securities Act § 11 as materially false statements of fact rather than nonactionable estimates or opinions.
2. Whether omission of internal estimates and additional detail about NRC licensing proceedings rendered the registration statement and prospectus materially misleading under § 11.

## Decision

- The Seventh Circuit affirmed summary judgment for Edison and the underwriters on the § 11 claim.
- The court held the cost projections were not actionable where presented as estimates, subject to substantial uncertainty, and accompanied by disclosures describing significant risks and variability.
- The court held Edison had no § 11 duty to disclose every internal estimate or to restate in offering documents the full detail of regulatory proceedings that were uncertain and publicly available.
- The court concluded the plaintiff failed to show a material misstatement or omission in the registration materials.

## Legal Principles

- Section 11 liability requires an untrue statement of a material fact or omission of a material fact necessary to make the statements made not misleading.
- Forward-looking estimates are not false merely because later events turn out worse; they become actionable if not genuinely believed, lacking a reasonable basis, or misleading due to omission of known facts that seriously undermine them.
- Meaningful, specific cautionary disclosures about risks and uncertainty can defeat claims that projections were materially misleading when the warned-of risks occur.
- An issuer is not required under § 11 to disclose every internal forecast, contingency, or worst-case scenario; the duty is to avoid materially misleading disclosure.
- In a Form S-3 shelf offering that incorporates periodic reports and assumes an informed market, § 11 generally does not require repeating extensive publicly available information about ongoing regulatory proceedings absent an affirmative misrepresentation.

## Conclusion

The court held that Edison’s offering materials, viewed in context of disclosed uncertainties and risk warnings and the public nature of the regulatory process, did not contain material misstatements or omissions under § 11, so defendants were entitled to summary judgment.


Wielgos v. Commonwealth Edison Co., 892 F.2d 509 (7th Cir. 1989)